A series of recent studies by the Packaging Machinery Manufacturers Institute (PMMI) evaluated the fluctuating value of United States packaging machinery and cast a forward eye to future manufacturer concerns. While there was growth in most of the major indicators, reports suggest that real causes for these gains may yield unexpected results in the forthcoming year.

Uncertain Gains
2007 was the sixth consecutive year of positive growth for the packaging machinery sector. According to PMMI's 2008 Shipments and Outlook Study, the total value of U.S. packaging machinery shipments rose by 3.9 percent, increasing to $6.2 billion from the previous year's total of $5.97 billion. Previous gains for each year between 2003 and 2006 were 9.3 percent, 8.1 percent and 6.0 percent, respectively, indicating a slowdown in the growth rate through 2007.

Export value rose by a dramatic 17.8 percent, driven partly by the foreign pricing advantage conferred by a declining U.S. dollar and consumer reluctance toward major spending. Imports gained by 10.1 percent, however this was also driven by the dollar's lowered strength, meaning that U.S. domestic demand in terms of machinery units was likely unchanged from the previous year.

The order backlog for packaging machinery decreased to $1.63 billion in 2007, a drop of 9.1 percent. According to the 2008 Shipments and Outlook Study, "[t]he lower volume of orders booked but not shipped heading into 2008 largely reflected customers' growing concerns at the time about the direction of the economy."

According to figures provided from the U.S. Department of Commerce (as of the end of August 2008), U.S.-made packaging machinery exports to the European Union's 27 countries alone is up 11.8 percent. That follows a 14.2 percent rise in 2007.

Market Distribution
PMMI states that the majority of packaging machinery shipments last year was directly sold to end-users, accounting for 78.8 percent of sales distribution. Another 18.1 percent went to machinery distributors, and the remaining 3.1 percent was sold to other machine manufacturers.

Among the end-user market, nearly 38 percent of purchases were in the food industry, 22.3 percent in beverages and approximately 10 percent in the medical industry. The remaining portion of sales was divided among chemical manufacturing, industrial and automotive production, converters, paper production and the personal care industry.

Conveyor, feeding, orienting and positioning equipment accounted for over a fifth of the packaging machinery sold in 2007, totaling $1.325 billion. The coding, printing, stamping and dating category was valued at $562 million; palletizing machinery at $486 million; tray forming, packing and sealing equipment at $436 million; bottling machinery at $409 million and labeling machinery at $398 million.

Industry Outlook
PMMI's 2008 U.S. Packaging Machinery Purchasing Plans Study initially predicted an overall increase of 0.6 percent in the value of packaging machinery by the end of 2008 based on a survey of purchasers' expectations. However, increasing signs of a recession caused the researchers to provide updated estimates. The revised figures scaled back to 0.4 percent growth, with an expected total value of $6.292 billion for end-of-year 2008.

The follow-up survey stated that 55.6 percent of purchasers did not expect to alter their plans for the future, 22.5 percent expected higher spending, and 21.9 foresaw cutbacks. Larger companies were forecast to experience higher rates of budget cuts, while medium-sized businesses were the likeliest sources for increased spending in the future.

"U.S. packaging machinery shipments are forecast to grow at an average annual real rate of +1.9 percent over the next three years (2008-2010), increasing from an estimated $6.207 billion in 2007 to $6.558 billion (constant 2007 dollars) by 2010," according to the 2008 Shipments and Outlook Study.

However, some of the major factors that will surely influence or alter expectations include:

• Lower consumer spending due to credit shortages, higher material costs and increasing energy expenses;

• Manufacturing capacity, which has declined slightly in U.S. plants overall, but remained steady among food manufacturers who account for the largest number of packaging machinery purchases;

• Export conditions that depend on the strength of the U.S. dollar, with a weaker dollar creating more favorable growth in foreign markets; and

• Competition between the American market and emerging markets, particularly China, as well as competition among domestic packaging machinery companies.

While the situation seems far from dire and many researchers remain optimistic about the near-future, the packaging machinery industry may experience some of the turmoil already afflicting manufacturers in other fields.

Resources

2008 Shipments and Outlook Study
Packaging Machinery Manufacturers Institute, Sept. 9, 2008

2008 U.S. Packaging Machinery Purchasing Plans Study
Packaging Machinery Manufacturers Institute, February 2008

Packaging Machinery Purchasers Confirm Predictions
by Kate Achelpohl
Packaging Machinery Manufacturers Institute, July 21, 2008